# Ohio Contractor Taxes and Licensing: Taxable Services, the CAT and BWC

Ohio contractors don't collect sales tax on real property work: they're the consumer of materials and pay tax when buying them. But Ohio taxes many services trades businesses sell, including repair and installation of personal property, lawn care and landscaping, janitorial work, exterminating and carpet installation. The state rate is 5.75%, with county add-ons.

## Key takeaways

- "Contractors and home remodelers do not collect sales tax on their work" on real property; they pay tax on materials.
- Lawn care, landscaping, snow removal and building cleaning become taxable once a provider earns $5,000 or more a year.
- Carpet installation is "taxable on both materials and labor" and is never a construction contract.
- Businesses with more than $6 million a year in Ohio taxable gross receipts pay the 0.26% Commercial Activity Tax.
- All Ohio businesses with employees must get workers' comp through the state Bureau of Workers' Compensation.

## What Ohio taxes that other states don't

Ohio's construction rule is ordinary. Its list of taxable services is not. The Ohio Department of Taxation says "contractors and home remodelers do not collect sales tax on their work," because a contractor that buys materials for incorporation into real property "is the consumer of those materials or services and needs to pay sales or use tax on their purchase price." But a company that also mows lawns, cleans buildings, kills bugs or installs carpet is selling services Ohio taxes.

**Ohio: taxable services trades businesses commonly sell**

| Service | Ohio treatment |
| --- | --- |
| Repair of personal property (appliances, equipment) | "Taxable unless the item being repaired is exempt" |
| Installation of personal property | "Taxable unless the installed item is exempt" |
| Lawn care, landscaping, snow removal | "Taxable if the provider earns $5,000+ annually" |
| Building cleaning and janitorial | Taxable once you reach $5,000 in a calendar year; "the $5,000 does not reset once reached" |
| Exterminating | Taxable |
| Security services | Taxable |
| Carpet installation | "Taxable on both materials and labor"; carpet is "never a construction contract" |
| Plumbing, electrical and HVAC repair on a building | Not building maintenance services; real property work isn't taxed to the customer |

_From the Ohio Department of Taxation's taxability guidance, checked 2026-10-19. Check with the department on mixed or unusual jobs._

The $5,000 threshold catches small operators off guard. A side snow-removal business that crosses $5,000 in a year has to start charging tax, and for building cleaning the department says the threshold "does not reset once reached." Neighbors like [Michigan](https://www.brix.so/taxes/michigan) and [Indiana](https://www.brix.so/taxes/indiana) set their own service rules, so don't carry Ohio habits across the line. See [sales tax on labor vs. materials](https://www.brix.so/learn/sales-tax-on-labor-vs-materials) for the wider picture.

## Is labor taxable on Ohio construction jobs?

No, not when the work improves real property. The contractor pays tax on the materials and the customer's construction invoice has no sales tax. The line Ohio draws is between real property and personal property: if what you install stays personal property, the department says the contractor "is selling tangible personal property and should charge sales tax." Repairing personal property, such as a freestanding appliance or a piece of equipment, is also taxable.

> **Example: one Ohio HVAC company, three tickets (illustrative)**
>
> **New furnace and ductwork in a home:** real property improvement. The company paid tax on the equipment and charges the homeowner no sales tax.
>
> **Repairing a portable dehumidifier:** repair of personal property. Taxable to the customer at the county rate.
>
> **Annual janitorial contract for an office, $8,000:** building cleaning, past the $5,000 threshold. Taxable.

## Materials, use tax and Ohio rates

Contractors "owe use tax on their untaxed purchases of tangible personal property used in Ohio." Exemption certificates for qualifying construction contracts use Form STEC CC, and direct pay permits are available. One useful rule for border contractors: "building and construction materials sold to a construction contractor for incorporation into real property outside this state are not subject to Ohio sales or use tax if the materials would be exempt from tax when sold to the contractor in the other state." See [use tax for contractors](https://www.brix.so/learn/use-tax-for-contractors).

The state rate is 5.75%. Counties and transit authorities can add up to 3%, for a combined maximum of 8.75%. Rates change only at the start of a quarter; for example, Warren County moved from 6.75% to 7.25% effective October 1, 2026. Check the department's county rate table for the job location.

## Ohio contractor licensing (OCILB)

Ohio splits licensing between the state and local governments. The Ohio Construction Industry Licensing Board (OCILB), part of the Department of Commerce's Division of Industrial Compliance, licenses "Electrical, Heating Ventilating and Air Conditioning (HVAC), Plumbing, Hydronics and Refrigeration Contractors." It "regulates commercial contractors," and those licenses are also called master licenses. For homes, "all local building and health departments regulate residential contractors," though some require the state license anyway.

**Ohio contractor licensing by trade**

| Trade | Agency | License | Official page |
| --- | --- | --- | --- |
| Electrical (commercial) | OCILB, Ohio Department of Commerce | Electrical contractor (master) license | [OCILB](https://com.ohio.gov/divisions-and-programs/industrial-compliance/boards/ohio-construction-industry-licensing-board) |
| HVAC (commercial) | OCILB | HVAC contractor license | [OCILB](https://com.ohio.gov/divisions-and-programs/industrial-compliance/boards/ohio-construction-industry-licensing-board) |
| Plumbing (commercial) | OCILB | Plumbing contractor license | [OCILB](https://com.ohio.gov/divisions-and-programs/industrial-compliance/boards/ohio-construction-industry-licensing-board) |
| Hydronics, refrigeration (commercial) | OCILB | Hydronics or refrigeration contractor license | [OCILB](https://com.ohio.gov/divisions-and-programs/industrial-compliance/boards/ohio-construction-industry-licensing-board) |
| Residential trades, general contractor, roofing | Local building and health departments | Local registration or license; not on OCILB's list | Your city or county building department |

_Checked 2026-10-19. Local departments may require an OCILB license for residential work._

More on how licensing works in general: [contractor license](https://www.brix.so/learn/contractor-license).

## Ohio income tax, the CAT and city income taxes

Ohio can layer up to three taxes on a growing business. **State income tax:** under ORC 5747.02, for taxable years beginning in 2026, income above $26,050 is taxed at "$332.00 plus 2.75% of the amount in excess of $26,050." Owners of pass-through businesses get a separate treatment: "taxable business income is taxed at a flat rate of 3%," and your CPA can tell you how the business income deduction and that rate apply to you.

**Commercial Activity Tax (CAT):** "For tax years 2025 and forward: Businesses with more than $6 million a year in Ohio TGR need to pay the CAT," at ".26% (.0026) of Ohio Taxable Gross Receipts." It's a tax on receipts, not profit, and it "cannot be separately billed or invoiced" to customers. Most small trades shops fall under the $6 million exclusion, but a growing company should watch it.

**Municipal and school district income tax:** many Ohio cities levy a municipal net profit tax, "a local income tax levied on the net profit of businesses," and businesses can opt in to have the state administer it. Some school districts also levy an income tax. Ask your CPA which ones apply where you live and work. Quarterly estimates may need to cover all of these; see [quarterly estimated taxes for contractors](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors) and the [quarterly estimated tax calculator](https://www.brix.so/tools/quarterly-estimated-tax-calculator).

## Workers' comp in Ohio: the state fund

Ohio is one of the few states where you can't buy workers' comp from a private insurer. Ohio.gov says "all businesses with employees must have workers' compensation coverage through the Bureau of Workers' Compensation (BWC)." Ohio law defines a covered employer to include private employers with "one or more employees or shared employees regularly in the same business." The alternative is BWC-approved self-insurance. Background: [workers' compensation](https://www.brix.so/learn/workers-compensation).

## Local taxes in Ohio

- **County and transit sales tax:** up to 3% on top of 5.75%, changing only at the start of a quarter.
- **Municipal net profit tax:** levied by many cities on business profit.
- **School district income tax:** levied by some districts on residents.

> **Not tax or legal advice**
>
> Ohio's taxable services, the CAT and local income taxes interact. Work with a CPA who knows Ohio contractors, and contact the Ohio Department of Taxation for written guidance on specific services.

BRIX lets you mark which line items are taxable, like a janitorial contract or a carpet install, and syncs every invoice with QuickBooks so sales tax is easy to reconcile. BRIX doesn't decide taxability or file returns.

- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.
- [Bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes): Keeps expenses categorized, tracks 1099 subcontractors and sales tax, and reminds you of quarterly estimated tax dates. BRIX does not file taxes or give tax advice.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

### Neighboring state guides

- [Michigan](https://www.brix.so/taxes/michigan): Use tax registration, no local sales tax
- [Indiana](https://www.brix.so/taxes/indiana): Contract type decides sales tax
- [North Dakota](https://www.brix.so/taxes/north-dakota): Also a state-fund comp state

## Frequently asked questions

### Do contractors charge sales tax in Ohio?

Not on real property work. The Ohio Department of Taxation says contractors and home remodelers don't collect sales tax on their work; they pay tax on the materials they buy. Installing items that stay personal property, and some services, are taxable.

### Is lawn care taxable in Ohio?

Yes, once you earn $5,000 or more a year from it. Ohio taxes lawn care, landscaping and snow removal for providers at or above that threshold. Building cleaning and janitorial services have a similar $5,000 threshold that doesn't reset once reached.

### Is carpet installation taxable in Ohio?

Yes. Ohio says carpet installation is taxable on both materials and labor, and carpet is never treated as a construction contract. Charge sales tax on the full installed price at the county rate.

### What is the Ohio Commercial Activity Tax?

The CAT is a 0.26% tax on Ohio taxable gross receipts. For tax years 2025 and later, only businesses with more than $6 million a year in Ohio taxable gross receipts pay it. It can't be separately billed to customers.

### Does Ohio require a contractor license?

OCILB licenses commercial electrical, HVAC, plumbing, hydronics and refrigeration contractors. Residential contractors are regulated by local building and health departments, which may require the state license. Check with the city or county.

### Can I buy workers' comp from a private insurer in Ohio?

No. All Ohio businesses with employees must get coverage through the Bureau of Workers' Compensation, unless BWC approves them to self-insure. Ohio is a state-fund state.

### What is the Ohio sales tax rate?

The state rate is 5.75%. Counties and transit authorities can add up to 3%, for a combined maximum of 8.75%. Rates change only at the start of a quarter.

## Related

- [Do Contractors Charge Sales Tax on Labor or Materials?](https://www.brix.so/learn/sales-tax-on-labor-vs-materials)
- [What Is Use Tax for Contractors?](https://www.brix.so/learn/use-tax-for-contractors)
- [What Is a Contractor License?](https://www.brix.so/learn/contractor-license)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)
- [Michigan Contractor Taxes and Licensing: Use Tax, LARA Licenses and City Income Tax](https://www.brix.so/taxes/michigan)
- [Indiana Contractor Taxes and Licensing: Lump-Sum vs. Time-and-Material Contracts](https://www.brix.so/taxes/indiana)
- [North Dakota Contractor Taxes and Licensing: Materials, the $4,000 Rule and WSI](https://www.brix.so/taxes/north-dakota)
- [Self-Employment Tax Calculator (2026)](https://www.brix.so/tools/self-employment-tax-calculator)

## Sources

- [Ohio Department of Taxation — Sales and use tax taxability](https://tax.ohio.gov/business/sales-and-use-tax/taxability) (checked 2026-10-19)
- [Ohio Department of Taxation — Sales and use tax](https://tax.ohio.gov/business/ohio-business-taxes/sales-and-use) (checked 2026-10-19)
- [Ohio Department of Taxation — County rate table, Q4 2026](https://tax.ohio.gov/business/sales-and-use-tax/rate-tables/by-county-q4-2026) (checked 2026-10-19)
- [Ohio Department of Taxation — Commercial Activity Tax](https://tax.ohio.gov/business/ohio-business-taxes/commercial-activities) (checked 2026-10-19)
- [Ohio Department of Taxation — Annual tax rates](https://tax.ohio.gov/individual/resources/annual-tax-rates) (checked 2026-10-19)
- [Ohio Department of Taxation — Municipal net profit tax](https://tax.ohio.gov/business/municipal-net-profit-tax) (checked 2026-10-19)
- [Ohio Revised Code 5747.02 — Income tax rates](https://codes.ohio.gov/ohio-revised-code/section-5747.02) (checked 2026-10-19)
- [Ohio Department of Commerce — Ohio Construction Industry Licensing Board](https://com.ohio.gov/divisions-and-programs/industrial-compliance/boards/ohio-construction-industry-licensing-board) (checked 2026-10-19)
- [Ohio.gov — Workers' compensation](https://ohio.gov/business/resources/workers-compensation) (checked 2026-10-19)
- [Ohio Revised Code 4123.01 — Definitions (employer)](https://codes.ohio.gov/ohio-revised-code/section-4123.01) (checked 2026-10-19)

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Written by BRIX Editorial Team. Last updated 2026-10-19. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/taxes/ohio